Sales Tax Push Continues in City Debate

By Bill Dries

The idea of a sales tax hike referendum in November to fund a restoration of cuts in city health care insurance benefits keeps rolling.

Although Memphis Mayor A C Wharton Jr. is trying to close the door on changes to the city budget, the health insurance issue that has caused protests could make that difficult.

(Daily News File/Andrew J. Breig)

The Memphis chapter of the Southern Christian Leadership Conference came out in favor of the citywide local option sales tax hike Tuesday, July 22, after a closed luncheon attended by leaders of municipal unions and Memphis Mayor A C Wharton Jr.

Memphis Police Association president Mike Williams suggested the referendum to Memphis City Council members last week, but no one on the council has put a referendum ordinance on the ballot.

And after initially saying he could possibly support such a measure, Wharton later added in a written statement that he would not be proposing such a sales tax hike. Wharton has been attempting to close out the likelihood of reopening the city budget for the fiscal year that began July 1, including the health insurance cuts for city employees and retirees that take effect later this fiscal year.

But his attendance at Tuesday’s session raises new questions about his effort, with the SCLC expected to take its push for the sales tax hike to the first council meeting in August.

Meanwhile, conflicting rulings from two federal appeals courts Tuesday could complicate the transition of some city employees and retirees to the health care exchanges that are part of the Affordable Care Act and the exit from city coverage and subsidies of health insurance premiums.

The Washington Circuit Court of Appeals ruled Tuesday that federal subsidies in the form of tax credits for those buying insurance on the exchanges are only for those who bought such insurance through a state-run exchange.

The Fourth U.S. Circuit Court of Appeals ruled the same day that the subsidies are available to those who buy insurance through state-run exchanges and exchanges run by the federal government.

Tennessee opted not to have a state-run exchange, going instead for a federally run exchange.

The subsidies have been a part of the discussion about the transition for city employees and retirees once the city’s changes take effect.

Council members had been considering a $2 million pool of city funding to subsidize the transition of some to insurance bought through the exchanges in the first year.

But that resolution changed dramatically because of administration concerns that the availability of city subsidies could jeopardize federal subsidies.

The two court rulings call into question the future of the federal subsidies, with appeals courts in other circuits weighing similar cases and an appeal to the U.S. Supreme Court likely.

Meanwhile, Memphis municipal union leaders weighing a federal lawsuit against the city over the health insurance changes and proposed pension plan changes are reviewing the dismissal Tuesday of their 2011 lawsuit challenging the city’s decision to cut city employees’ pay by 4.6 percent.

In the dismissal, U.S. District Judge Samuel “Hardy” Mays said the decision to cut pay was a part of the city’s legislative process and within the council’s role as spelled out in the city charter.

Williams and Memphis Fire Fighters Association president Thomas Malone have each said they intend to file a lawsuit over the benefit and pension cuts. Those challenges would likely be along the lines of the lawsuit over the pay cut, alleging a violation of the equal protection clause of the U.S. Constitution and the city’s impasse ordinance for resolving impasses in contract negotiations.

Like the pay cuts, the council approved the health insurance cuts. Council members are set to vote on the pension changes in October.